Fear of inflation forces Americans to reconsider economic choices: CNBC Survey

Rising inflation is causing Americans to reconsider how they spend their money.

The consumer price index, which measures a broad basket of goods and services, rose 7.9% in February from 12 months earlier. Prices rise on everything from the food you put on the table to the gas that drives your car.

It weighs heavily on people’s minds, with 48% thinking of rising prices all the time, according to a study by CNBC + Acorns Invest in You, conducted by Momentive. The online poll was conducted 23-24. March among a national committee of 3,953 adults.

Three-quarters are worried that higher prices will force them to reconsider their economic choices in the coming months, the survey showed.

Inflation costs the average U.S. household an additional $ 296 a month, according to an analysis by Moody’s Analytics. Experts expect it to get worse before it gets better.

Still, there has been no significant impact on consumer spending, although retail sales grew at a slower pace than expected in February.

The biggest area people have cut back on is eating out, with 53% saying they have done so, according to the survey. They also run less and cancel, among other things, monthly subscriptions.

If higher prices continue, dining, driving and trips or vacations are the three best areas Americans plan to cut back on even more.

Admittedly, the past year has been difficult for many. As many as 52% said they are under more financial stress than a year ago. They are most concerned about gas prices, housing costs and food costs. In the last year, gas rose by 38%, shelter rose by 4.7% and food prices rose by 7.9%.

Meanwhile, a large proportion of Americans are dissatisfied with the White House response, with 61% rejecting the way President Joe Biden handles inflation.

Fear of recession

The current environment has a majority of Americans worried about an economic recession, with 81% of respondents believing it is likely to happen this year.

“People are definitely on edge,” said Moody’s Analytics chief economist Mark Zandi. “Risks of recession are high.”

He sets the odds to 1 out of 3 and rises.

When does inflation decrease?

Inflation was triggered by the pandemic, which distorted supply chains and labor markets, and exacerbated by the Russian invasion of Ukraine, which affected gas and food prices, Zandi explained.

“If this diagnosis is correct, as the pandemic subsides, and when we get the other side of the fallout from the Russian invasion, inflation should be moderated,” he said.

However, consumers will get more pain in the short term as inflation continues, Zandi said.

“We have a couple of bad months ahead,” he said.

He predicts that inflation will peak around May, and by this time next year it will be much lower, depending on how global events unfold, as well as the reaction of the Federal Reserve. The central bank raised interest rates last month to fight inflation and is planning six more increases this year.

If the Fed does not calibrate things quite right, the economy could go into a recession, Zandi warned.

Navigating higher prices

Grace Cary | Moment | Getty Images

The first thing you need to do is keep track of your financial situation.

Asking yourself some key questions can help you figure out where you might be able to reduce expenses, said certified financial planner Ashton Lawrence, a partner at Goldfinch Wealth Management in Greenville, South Carolina.

“What does the cash flow look like? What type of debt, how much debt are we looking at?” he said.

“It’s about making the small changes and controlling where you can control.”

More from Invest in You:
Most Americans are worried about a recession hitting this year
Here’s what consumers are planning to cut back on if prices continue to rise
Here you can see how retirees can navigate higher prices

When you see where you spend money, break it down into needs and wants, and start cutting back on things that are optional, said CFP Carolyn McClanahan, founder and director of financial planning at Life Planning Partners in Jacksonville, Florida.

In fact, not only does it cost more to eat out all the time than to cook at home, it’s not that healthy either, said McClanahan, who is also a doctor. Once you are in the grocery store, use coupons and comparison purchases to help you save money.

There will be nights when time is tight and you are tempted to order takeaway for dinner. McClanahan cooks in bulk on Sundays and puts meals in the freezer for those nights.

Carpooling or planning car trips to minimize driving can help with gas, and the same can work from home a few days a week if possible.

While it’s natural to be worried about rising prices, you can not control them – and to worry about it is not good for your health, McClanahan said.

“Just think of the things you can control,” she said.

“Making sure you spend your money in a thoughtful way is the one thing you can do to help alleviate the world around you.”

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorn.

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